Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: maceng2 who wrote (25211)	11/9/2002 10:37:44 AM
From: Steve Lee	Read Replies (1) of 74559

Here's how they establish credit limits: you send them all your bank statements for a period (I think it was 3 months) and they look at the minimum cash balance you had. Your credit limit is 20% of that. So to run up a 10 grand bill u cant pay, you would already have had to con someone into lending you 50k for 3 months. I guess it works for them. If you can't get or don't want a credit acct then you can have a fixed risk acct. In that arrangement they request a deposit up front and apply mandatory and guaranteed stop losses. Because the stop loss is guaranteed, the bookie has the risk of a gap up or down past the stop loss. So they build this risk into the spread. Hence a credit account carries lower spreads and is therefore what I use. Of course, if u were to expose yourself to potential losses greater than you can afford, then you would be in trouble. Just the same as if you put credit card advances or margin money (or your friend's loan shark mone) on the line thru a regular broker.

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